Mon. Jul 13th, 2020

Top10: India world’s 3rd-largest military spender

13 min read

Good morning!
5 THINGS FIRST

Today: IMD’s heatwave warning for areas in Rajasthan, MP, Telangana, Andhra and UP; Air India’s repatriation flights from Male, Dubai; Czech, Hungarian football championships resume. Tomorrow: Israeli PM Benjamin Netanyahu’s corruption trial to begin; Heavy rainfall likely in parts of West Bengal, Sikkim, Assam, Meghalaya and Arunachal Pradesh

1. Surge continues but Centre says lockdown has helped
1. Surge continues but Centre says lockdown has helped
  • The outbreak: India marked another single-day record with 6,339 new confirmed Covid-19 cases reported on Friday, of which 2,940 were reported in Maharashtra, by far the worst-hit state. The surge took the total cases yet to 123,081, nearly a third of which are active cases declared in the past four days alone. 140 fatalities were recorded on the day, mostly in Maharashtra (63), Gujarat (29) and Delhi (14), adding to over 3,700 fatalities till date.
  • The central government, however, cited a few projections — independent and in-house — to reiterate that the lockdown has helped in limiting the damage. Niti Aayog member (health) Dr V K Paul, who also heads the national Covid-19 taskforce, said as per the Public Health Foundation of India, the lockdown has helped avoid 78,000 deaths, while the Boston Consulting Group (BCG) said India may have avoided 120,000 to 210,000 deaths. The statistics ministry and ISI put that figure at 54,000 averted deaths. Nevertheless, Paul said: “The fight against Covid-19 is going to be a long haul and its progress in India will depend not just on the behaviour of the virus but also containment measures at the government, community and individual level.”
  • 22 opposition parties, after a meeting convened by Congress chief Sonia Gandhi, has issued an 11-point charter, which, among other things, calls for the Centre to pay a monthly amount of Rs 7,500 for six months to families outside the income tax bracket, distribution of 10kg of foodgrains for a similar period to needy families and “reversal of all unilateral policy decisions, particularly the annulment of labour laws”.
  • The Indian Railways, meanwhile, has decided to reconvert around 3,200 coaches — or 60% of total — that were remodelled into isolation coaches for regular use in Shramik Special trains to repatriate India’s internal migrants. The isolation coaches have so far not been used or were used only sparingly; around Rs 2 lakh was spent to remodel each coach for Covid-care, railway officials said.
  • Overseas citizens: The home ministry on Friday restored the right of multiple-entry, life-long visa facility to certain categories of Overseas Citizens of India (OCIs) to facilitate their travel to the country, making them eligible for boarding the special Vande Bharat flights and ships repatriating Indians from abroad.
2. India’s economy hasn’t been ‘officially’ this bad in 40 years
2. India’s economy hasn’t been ‘officially’ this bad in 40 years
  • Sudden move: “GDP growth in 2020-21 is estimated to remain in negative territory” — with those words RBI Governor Shaktikanta Das finally admitted to what has been projected all along by various rating agencies and investment banks, that far from achieving a 5.5% real GDP growth in 2020-21, as forecast in RBI’s monetary policy committee (MPC) report in April, the Indian economy is set to contract, diving right into negative territory. However, India’s central bank still shied away from putting a number to that “negative territory”. The last time the Indian economy contracted — by 5.2% — was in 1979-80, or over 40 years back.
    Just how negative can we get (1)
    When India went negative
  • Another cut: The RBI Governor’s announcement, two weeks ahead of the scheduled MPC meeting, about India’s GDP growth was prefaced by a second rate cut in as many months — the repo and the reverse repo rate were cut by 0.40% to 4% and 3.35% respectively. The cut is expected to lead to a fall in retail loan (for cars, houses etc) rates (the country’s largest private sector bank, HDFC Bank has already announced a cut in its base rate by 0.55%, to 8.10% — base rate being the minimum rate below which banks can’t lend).
  • Cut-to-cut: The last time the RBI announced a repo rate cut — the rate at which it lends to banks — was on March 27, when it cut rates by 0.75%, while the reverse repo rate — the rate that banks earn when they park their surplus funds with RBI — was cut by 0.90%. If the RBI’s hope was that it would lead to greater lending by banks, that was pretty much dashed as banks deposited an average of Rs 7 lakh crore daily with the RBI in April, which went up to Rs 8.5 lakh crore in May. Another cut, this time only in the reverse repo rate, was done on April 17, bringing it down to 3.75%. However, none of these measures have enthused the banks, who continue to remain risk-averse in lending — not that people or companies are lining up with loan applications. Will the latest rate cut do the trick? If at all a hint was needed, it came from the stock markets, where the benchmark Bank Nifty fell more than 800 points in intra-day trade, to close with a loss of 2.57%.
3. The good, not-so-good and the ugly of RBI’s rate cut
3. The good, not-so-good and the ugly of RBI’s rate cut
  • The good: Well, the good part is that your home loan rates will come down, if the banks decide to pass on the repo rate cut of 40 basis points — 0.40% — to you. Depending on your loan amount and the tenure, as also the rate of interest charged, you could end up saving a few hundred to a few thousand rupees per month in your EMI. However, how soon your EMIs reduce will depend on whether your home loan is linked to external benchmarks like the repo rate or to the marginal cost of funds based lending rate (MCLR), in which case the reduction in EMI may take time.
    loan
  • The not-so-good: While the RBI’s extension of the moratorium on loan repayments by another three months — taking the total moratorium period to six months — looks attractive on paper, it actually pinches the borrowers more, should they opt for it, in terms of higher interest outgo or an increase in the loan tenure. That could also explain why just about 20% of SBI’s borrowers have availed of the moratorium facility. For those who avail of the moratorium in the early stages of the loan tenure, the accumulated interest outgo at the end of six months on August 31 will be a huge amount — since in the initial years, the interest component of the EMI could be as high as almost 90%. See calculations here
  • The ugly: The unkindest cut of them all, will perhaps be felt by India’s senior citizens, many of whom are largely dependent for their financial needs on the interest income from their bank deposits. The country’s largest bank, SBI, for instance, which had cut its savings account rates to 2.75% after the last repo rate cut, has reduced its term deposit rates of between 2 to 3 years for senior citizens from 6.40% in the beginning of March to 6% in May. These rates are bound to come down even further after Friday’s rate cut. Moreover, the possibility that the RBI will be more amenable to another rate cut can not be ruled out, given that boosting the economic growth remains top priority for now
4. Taking stock of Amphan, either side of the Sundarbans
4. Taking stock of Amphan, either side of the Sundarbans
  • The Sundarbans once again proved to be the key saviour for Bangladesh in times of natural calamities as the thick mangrove forest — shared jointly with India, with nearly three-fifths (6,017 sq km) in Bangladesh — absorbed the fury of Cyclone Amphan. “If the Sundarbans were not there, the entire Khulna Division would be like a desert without any tree or human habitation, because the cyclone would bring salty sea water and destroy all vegetation,” eminent Bangladeshi wildlife and forest ecology expert Dr Reza Khan told The Daily Star.
  • The Sundarbans had also shielded Bangladesh during Cyclone Sidr and Cyclone Aila — in 2007 and 2009, respectively — hugely limiting the number of casualties. “The mangroves do not just help reduce wind speed drastically when the storm moves through the delta but even helps break the waves and the surge triggered,” Md Moinuddin Khan, forest conservator of the Khulna region, told Dhaka Tribune. It could not be immediately ascertained how much damage the forest itself had sustained.
  • The picture is grimmer though on the Indian side. Take Sundarbans’ Gosaba, an administrative area of the river delta that juts into the sea. Amphan’s completely destroyed around 26,000 homes and damaged another 14,000 there, informed local disaster management official Pradip Kumar Dalui. It also damaged some 19 km of embankments around Gosaba, causing 13 breaches that led salty water to inundate swathes of land, he added. If the embankments aren’t fixed, “we won’t be able to save the Sundarbans”, Dalui told Reuters by phone.
  • Rising salinity in water will put tens of thousands of people out of work — think water unfit for irrigation. And the affected people can’t migrate to Kolkata or other cities in search of work because of the Covid-19 pandemic. For the tens of thousands who have returned to the Sundarbans as part of the reverse migration, Amphan is “like a death knell”, The Telegraph quoted Sankar Halder, the founder of an NGO that works in several blocks of the Sundarbans. A survey by the NGO in five of the 29 blocks had revealed that close to 5,000 families were staring at starvation during the lockdown.
  • Meanwhile, PM Narendra Modi announced an advance financial assistance of Rs 500 crore for Odisha and an advance interim assistance of Rs 1,000 crore for West Bengal on Friday. He also announced ex gratia of Rs 2 lakh to the families of the deceased and Rs 50,000 to the injured from the PM’s Relief Fund. The death toll from Amphan stood at 86 for India, and 31 for Bangladesh.
6. Pak aircraft crashes, over 80 feared dead
6. Pak aircraft crashes, over 80 feared dead
  • An Airbus A320 passenger plane operated by the state-run Pakistan International Airlines, with 99 people on board, crashed in a crowded neighbourhood near the Karachi airport on Friday. At least 80 people are feared dead, though as of midnight airline CEO Arshad Malik said 41 were confirmed dead. The Pakistan civil aviation ministry said two passengers have survived. Karachi mayor Wasim Akhtar said at least five or six houses were destroyed.
  • Among the passengers were military officers, a former parliamentarian, an executive of a major television news channel and several prominent bankers from national and international banks, officials said. Pak publication Dawn reported that one of the two survivors was the president of Bank of Punjab, Zafar Masood.
  • A transmission of the pilot’s final exchange with air traffic control, posted on the website LiveATC.net, suggested some technical difficulty minutes before the crash, “We are proceeding direct, sir — we have lost engine,” a pilot said. “Confirm your attempt on belly,” the air traffic controller said, offering a runway. “Sir – mayday, mayday, mayday, mayday Pakistan 8303,” the pilot said before the transmission ended. “Our plane [an Airbus] A320 which was coming from Lahore to Karachi was on final approach,” said airline chief Arshad Malik. “The last words we heard from our pilot were that there is a technical problem and he was told on final approach that he has both runways available to him to land on. But the pilot decided that he wanted to go around.”
  • The last passenger air crash in Pakistan was on December 7, 2016, when a PIA ATR-42 crashed en route from Chitral to Islamabad, killing all 48 passengers and crew.
7. Khashoggi family ‘forgives’ his killers
7. Khashoggi family ‘forgives’ his killers
  • The family of Jamal Khashoggi has released a statement saying they have forgiven the Saudi journalist’s murderers. Published by Khashoggi’s son Salah — he lives in Saudi Arabia and had earlier received financial compensation from the royal court for his father’s killing — on Friday on Twitter, the Arabic translation reads: “In this blessed night of the blessed month [of Ramadan] we remember God’s’ saying: ‘If a person forgives and makes reconciliation, his reward is due from Allah.’ Therefore, we the sons of the Martyr Jamal Khashoggi announce that we pardon those who killed our father, seeking reward from the God almighty.”
  • A prominent critic of the Saudi government, Khashoggi had been writing for the Washington Post newspaper and living in the US before he was killed inside the kingdom’s consulate in the Turkish capital of Istanbul in October 2018. And while Saudi officials maintain his death was a result of a “rogue operation” and was not state sanctioned, their account of events has been doubted internationally, including by some intelligence agencies and the UN.
  • After offering changing accounts of his disappearance, Saudi authorities eventually submitted he was killed in a botched operation by a team tasked with getting him to return to the country. Last December, a court sentenced five people to death and three to jail for their role in his killing after a secretive trial in Riyadh. A UN special rapporteur, Agnes Callamard, labelled the Saudi trial the “antithesis of justice” and urged an independent investigation.
  • However, Salah said of the December verdict that “it has been fair to us and that justice has been achieved”. Experts believe Friday’s act of reconciliation may have a political motive — the country’s rulers might be attempting to deal with the issue of Khashoggi’s killing in order to more easily engage with democratic nations. Death sentences can be commuted in light of a pardon by the victim’s family under Islamic law, but it is not clear whether that will apply in this case.
8. Pandemic prompts a radical change in Facebook
8. Pandemic prompts a radical change in Facebook
Facebook campus at Menlo Park, California

Social distance: Facebook, the social media giant, plans to allow many of its employees, including future recruits, to work from home forever, Mark Zuckerberg, its founder and CEO, said Thursday, a radical shift from the Silicon Valley office culture of enabling dining, bathing, sports, gym and other activities, and the inactivity of a nap all within their premises. In a video chat with employees, he said the company would start “aggressively opening up remote hiring”, and about half its workforce would work remotely over the next five to 10 years. “We’re going to be the most forward-leaning company on remote work at our scale,” Zuckerberg said later in an interview.

Why it matters:

  • Work from home has gained traction as companies look to overcome the social distancing mandate forced upon by the pandemic. But most of these are temporary measures. Facebook is going further. “We’re going to let people request to work permanently remotely. We’re going to focus on experienced employees rather than new college grads,” Zuckerberg said. Twitter CEO Jack Dorsey had announced similar plans a few days earlier.
  • Gentrification: Counties in the US to Europe have complained of technology companies causing a spike in the rental market when they move-in to a locality — demand from high-earning employees pushes up home rentals, which then become unaffordable to the others. And large tech companies often cause a network effect by attracting similar companies keen to tap the talent pool, resulting in the gentrification of the locality.
  • Such criticism prompted Microsoft early this year to committee $250 million to affordable housing in Seattle, Washington, adding to the $500 million it already had. Apple last year pledged $2.5 billion for affordable housing and mortgage assistance in the Bay Area, California. A permanent remote working policy could ease the burden on host counties.
  • Pushing boundaries: An aggressive extension of remote working could also free overseas recruits from the hassle of immigration — which is increasingly getting stringent. Of course, there are several legal and labour challenges to truly this as we speak. But remember, tech companies often have short-term overseas postings. Also, perhaps countries that contribute the workforce would fancy the idea if the job market is under stress? Big Tech has mastered the unencumbered flow of capital across borders and would be tempted to push the boundaries on human capital. Move fast and break things?
9. Jio Platforms grabs a ‘five-for’
9. Jio Platforms grabs a ‘five-for’
  • American private equity giant KKR & Co became the latest global firm to buy a piece of Jio Platforms. KKR is forking out Rs 11,367 crore for a 2.32% stake in Jio, becoming its fifth investor in a month, said Reliance Industries (RIL) in a statement on Friday. The deal is also KKR’s largest investment in Asia.
  • So far Ambani has raised a combined Rs 78,562 crore in a month from selling roughly 17% in Jio. (The Jio investments started with a bang exactly one month ago, on April 22, with social networking giant Facebook’s stake purchase in the venture. Since then, three US private equity firms — Silver Lake Partners, Vista Equity Partners and General Atlantic — have also invested in Jio.) As of Friday, Ambani had a net worth of about $53 billion, making him the richest person in Asia. The deals are all part of the plan to make RIL net debt-free before Mar. 31, 2021.

Jio graphic

  • KKR’s investment valued Jio at an equity value of Rs 4.91 lakh crore — the same amount as the previous General Atlantic deal and a 12.5% premium to the first investment, by Facebook. (Jio’s enterprise value was Rs 5.16 lakh crore.)
  • KKR, which has been investing in India since 2006, manages multiple alternative asset classes, including private equity, energy, infrastructure and real estate, among others. The firm has invested more than $30 billion across over 20 tech companies, including ByteDance, the Chinese owner of the popular short-video app TikTok. KKR will invest in Jio through its Asia private equity and growth technology funds.
BEFORE YOU GO
10. A quiet Jamat-ul-Vida in Srinagar
10. A quiet Jamat-ul-Vida in Srinagar

Streets of Nowhatta, Srinagar, wore a deserted look as no prayers were offered at the historic Jamia Masjid on Friday. The last Friday of the holy month of Ramzan, called the Jamat-ul-Vida, is usually marked with special prayers and charity. Lockdown restrictions were, however, eased in Srinagar’s Lal Chowk so that people could do shopping ahead of Eid al-Fitr. Eid al-Fitr or the “festival of breaking the fast” is observed after the sighting of the crescent moon. Religious leaders of Kerala have, however, said Eid will be marked on Sunday in the state (same as Saudi and UAE). Photo: TOI/Bilal Bahadur

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Sourav Ganguly. The BCCI has moved the Supreme Court seeking important changes in its constitution that would allow the board president and secretary Jay Shah to complete their three-year terms by ducking the three-year cooling-off period prescribed by the Justice Lodha panel and approved by the apex court, applicable to both from July and June, respectively. In the application filed by treasurer Arun Singh Dhumal, the board said these changes were approved at the AGM on December 1 last year and it was seeking leave of the SC, as per its Aug. 9, 2018 order, to implement them by changing the board’s constitution.

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